bed bath behind‘s (BBBY -0.40%) The stock price fell 24% on June 29 after the retailer published a dismal first-quarter earnings report. Its revenue fell 25% year-over-year to $1.46 billion, which beat analysts’ expectations by $50 million, as comparable-store sales fell 23%.
Its net loss widened from $51 million to $358 million on a GAAP basis (Generally Accepted Accounting Principles) Basis. On a non-GAAP basis, it posted a net loss of $225 million, compared with a net profit of $5 million in the prior year, and a net loss of $2.83 per share that wasn’t widely estimated by analysts’ estimates of $1.44.
Image source: Getty Images.
Bed Bath & Beyond’s big profit loss prompted its board of directors to fire CEO Mark Triton, who took the helm in November 2019 to turn around the struggling big retailer. Investors initially adopted Triton, who previously served as targeting‘s (TGT -0.47%) chief trade officer, but turned against him when the company’s growth rates failed to improve.
These developments have turned Bed Bath & Beyond into a hot topic once again on Wall Street. Can this retailer rise from the rubble after shedding more than 80% of its market value over the past five years?
What happened to Bed Bath & Beyond?
Before Tritton arrived, Bed Bath & Beyond struggled to keep up Amazon (AMZN -2.49%)And the Walmart (WMT -0.28%)and the goal and IKEA in the evolving retail market. Meanwhile, activist investors have repeatedly accused the company’s management of neglecting its crowded stores, making bad acquisitions based on nepotism, and enriching family members and senior executives with excessive compensation.
These allegations eventually led to Bath & Beyond’s board of directors ousting CEO Stephen Timaris and hiring Tritton, who was instrumental in Target’s turnaround, to fix its crippled business. Unfortunately, Triton hardly had any time to implement his strategies before the pandemic began.
Bed Bath & Beyond revenue fell 7% to $11.16 billion in the 2019 fiscal year, which ended in February 2020, as comparable store sales fell 6.9%. Its net loss widened from $137 million to $613 million.
How did Tritton try to save Bed Bath & Beyond?
After taking office, Triton fired most of the company’s executives, stripped most of its non-core banners (including Christmas Tree Stores, One Kings Lane, and Coast Plus World Market), and focused on promoting its four core banners (Bed Bath & Beyond, BuyBuy BABY, Harmon Face ratings, and decorators). Triton has also closed hundreds of underperforming Bed Bath & Beyond stores, removed its stock of massive discounts, and expanded its e-commerce platform.
At first, those efforts seemed to be paying off. Its reported sales are still down 17% to $9.23 billion in fiscal 2020 — mainly due to a sharp drop in the first quarter as it closed stores during the onset of the pandemic — but starting in the second quarter, comparable-store sales have grown for four consecutive quarters.
Why did these efforts ultimately collapse?
Unfortunately, that recovery came to a sudden halt, and Bed Bath & Beyond companies began declining again over the next four quarters. Adjusted gross profit margins have also fallen below 30% over the past two quarters.
|
a period |
First Quarter 2021 |
Second Quarter 2021 |
Third Quarter 2021 |
Fourth Quarter 2021 |
First Quarter 2022 |
|---|---|---|---|---|---|
|
corporate growth |
86% |
(1%) |
(7%) |
(12%) |
(23%) |
|
Adjusted Gross Margin |
34.9% |
34% |
35.9% |
28.8% |
23.8% |
Data source: Bed Bath & Beyond.
He mainly blamed slowing corporate growth and profit margins on new COVID-19 variables, supply chain disruptions, and inflationary headwinds.
However, many other retailers faced the same challenges but achieved stronger growth. for exampleTarget’s businesses are still growing 12.7% in 2021 as well as 19.3% in 2020. Walmart’s US companies are up 6.4% in fiscal 2022, which ended last January and grew 15% over two years . Amazon sales in North America increased 18% in 2021.
So, it certainly appears that competition from better-run retailers remains a major problem for Bed Bath & Beyond, and strong writedowns — which crush gross margins — are not bringing shoppers back into its stores.
Her mysterious look justifies her assessment of the opponent
Bed Bath & Beyond did not provide any clear guidelines for the rest of the year. But during the conference call, Chief Financial Officer Gustavo Arnal said its companies “continue to trend in the negative 20% range” in the second quarter.
On the bright side, Arnal expects its companies to start improving sequentially in the second half of fiscal 2022 as it clears up its excess inventory. It also expects the company to reduce capital expenditures “a minimum of $100 million from $400 million to $300 million” for the full year.
Currently, independent board member Sue Gove will serve as interim CEO of the company. During the call, Goff said the company still had “a lot to do” and “must do it fast,” and would prioritize streamlining its business with its “back to basics tagline” to drive more traffic to its stores.
However, analysts still expect Bed Bath & Beyond revenue to fall 9% this year more than double net loss per share. Stocks may look cheap for less than once in this year’s sales, but investors should avoid this battered stock until some green shoots actually appear.